CREF Policy Update June 9, 2022

Mike Flood mflood@mba.org; Bill Killmer bkillmer@mba.org.

Commercial and multifamily developments and activities from MBA relevant to your business and our industry.

MBA sent a letter to the FDIC on Friday on its climate risk management principles for financial institutions. Last week, HUD issued temporary guidance implementing a procedural change impacting 221(d)(4) applications. And recently, FHFA finalized two rules related to the Enterprise Regulatory Capital Framework for the GSEs.

Sign MBA’s Home for All Pledge: Join the 260+ MBA member companies that have signed MBA’s Home for All Pledge, representing a commitment to promoting affordable rental housing; minority homeownership; and company diversity, equity, and inclusion. One senior executive (e.g., CEO, COO, President, Head of Lending, SVP) is encouraged to sign this online form on behalf of your organization.

MBA Comments on FDIC Statement of Principles on Climate-related Risk Management

MBA recently submitted comments on the Federal Deposit Insurance Corporation’s Statement of Principles for Climate-Related Financial Risk Management for Large Financial Institutions. The FDIC’s Statement of Principles was substantively identical to the Office of the Comptroller of the Currency’s Statement of Principles that MBA commented on in February of this year. In this comment letter, MBA supported both the FDIC’s and OCC’s proposals to rely on a principles-based approach to managing this risk, one that leverages existing risk management and supervisory processes. The letter also reiterated prior comments on the OCC Statement of Principles, including raising concerns around expectations for scenario testing.

• Why it matters: While the Statement of Principles technically applies only to depository institutions with over $100 billion in total consolidated assets, federal regulators will also adapt them to oversee smaller institutions’ management of climate-related risks across all sizes of institutions.
• What’s next: MBA will continue to monitor federal efforts to increase oversight and attention on climate-related issues, including the management of climate-related financial risks.

For more information, please contact Bruce Oliver at (202) 557-2840.

HUD Issues Temporary Guidance Implementing a Procedural Change to Underwriting Queue

Last Monday, the HUD issued temporary guidance implementing a procedural change impacting 221(d)(4) applications. The change permits 1) eligible pre-applications to convert to firm applications while still in the underwriting queue, and 2) future eligible applications to submit a direct to firm application. The direct-to-firm election is at the option of the borrower and lender and will expire in 120 days.

• Why it matters: HUD’s underwriting queue has experienced delays in the past year, warranting the need for significant process improvements for borrowers and lenders. Offering an option for 221(d)(4) deals to submit a direct to firm application creates a one-step process, reducing processing times up to several months (in certain cases).
• What’s next: MBA will continue to encourage HUD to explore a variety of solutions to shorten the queue and create a more efficient process.  

For more information, please contact Stephanie Milner at (202) 557-2747.

FHFA Issues Final Rules on GSE Capital Framework Disclosures and Capital Planning

Recently, the Federal Housing Finance Agency finalized two rules related to the Enterprise Regulatory Capital Framework for Fannie Mae and Freddie Mac. The first rule introduces additional public disclosure requirements for the GSEs and is intended to align with many of the public disclosure requirements for large banks under the regulatory capital framework adopted by U.S. banking regulators. The second rule requires the GSEs to submit annual capital plans to FHFA and provide prior notice for certain capital actions, which generally is consistent with the regulatory framework for capital planning for large bank holding companies.

• Why it matters: These final rules, in conjunction with the earlier MBA-supported changes to the leverage ratio and the treatment of credit risk transfer, represent FHFA’s broad reforms to the GSEs’ capital framework.
• What’s next: MBA will continue to work with FHFA on any future issues related to the GSEs’ capital framework and will advocate that FHFA and the U.S. Treasury Department remove a problematic provision from the Senior Preferred Stock Purchase Agreements (PSPAs) that requires the GSEs to adhere to an older version of the capital framework even if revised – thereby negating some of the positive effects of this revised framework.

For more information, please contact Stephanie Milner at (202) 557-2747.

Federal Agencies Publish Revised Interagency Flood Insurance Q&As 

On Tuesday, revised interagency flood insurance Q&As were published in the Federal Register. The Q&As were jointly issued on May 11, 2022, by the OCC, Federal Reserve, FDIC, National Credit Union Administration (NCUA), and the Farm Credit Administration (FCA). They cover both federal flood insurance rules and rules on private flood insurance acceptance.

• Why it matters: MBA led industry comments in response to two rounds of proposed revisions to the prior Q&As. Among other positive responses, the agencies added a new Q&A to clarify that blanket policies may include a deductible higher than the insurable value of any individual building covered by the policy.
• What’s next: MBA will continue to review the final Q&As and assess the extent to which they address concerns.

For more information, please contact Bruce Oliver at (202) 557-2840 or Sara Singhas at (202) 557-2826.

Commercial and Multifamily Mortgage Delinquency Rates Remain Low in First-Quarter 2022   

Commercial and multifamily mortgage delinquencies declined in the first quarter of 2022, according to the Mortgage Bankers Association’s (MBA) latest Commercial/Multifamily Delinquency Report, which was released on Tuesday. MBA’s quarterly analysis looks at commercial/multifamily delinquency rates for five of the largest investor-groups: commercial banks and thrifts, commercial mortgage-backed securities (CMBS), life insurance companies, and Fannie Mae and Freddie Mac. Together, these groups hold more than 80 percent of commercial/multifamily mortgage debt outstanding.

• Why it matters: Commercial and multifamily mortgage delinquency rates that were elevated by the onset of the COVID-19 pandemic continued to come down during the first quarter of 2022.
• Jamie Woodwell, MBA’s Vice President of Commercial Real Estate Research, said, “Given the strength in market fundamentals and valuations for most property types, delinquency rates are at the lower end of their historical range for most major capital sources.”

For more information, please contact Jamie Woodwell at (202) 557-2936.

State Trackers

• State eviction moratorium and legislative activity tracker available here and here.

For more information, please contact William Kooper at (202) 557-2737 or Grant Carlson at (202) 557-2765.

REGISTER: VOICES: Courageous Conversations with Men of Color

MBA is pleased to extend its award-winning webinar series, Voices: Courageous Conversations with Women of Color, to include a new conversation focusing on the male experience. Hear from a dynamic and diverse lineup of male industry leaders on their personal journeys throughout their careers. This timely conversation will inspire and inform while giving voice to the challenges and lessons learned.

There will be two sessions highlighted in this series:

• June 21: Courageous Conversations with Men of Color
• June 28: Courageous Conversations with Men as Allies

What’s next: This virtual series is complimentary for MBA Members. Learn more here.

For more information, please contact the DEI team. 

Upcoming MBA Education Webinars on Critical Industry Issues

MBA Education continues to deliver timely programming that covers the spectrum of challenges, obstacles and solutions pertaining to our industry. Below, please see a list of upcoming webinars – which are complimentary to MBA members:

• CFPB, UDAAP and the Focus on Junk Fees – June 9
• Serving Loan Applicants with Limited English Proficiency – June 14
• Leveling Up Your Social Media Strategy with Paid Advertising – June 28
• How to Navigate Lower Margins and a Tighter Market Through Effective Leadership and Embracing Technology – June 28

MBA members can register for any of the above events and view recent webinar recordings. For more information, please contact David Upbin at (202) 557-2931.